The Big Picture: America’s Real Estate Developer in Chief

This is the 35th installment of The Big Picture, a public symposium on what’s at stake in Trump’s America, co-organized by Public Books and NYU’s Institute for Public Knowledge. Read IPK Director Eric Klinenberg’s introduction here.

11.27.2017

On a clear day, from his 68th-floor penthouse on Fifth Avenue, President Trump can survey America’s greatest metropolis. To the west is a glass-and-steel forest of luxury towers bordering Central ...

On a clear day, from his 68th-floor penthouse on Fifth Avenue, President Trump can survey America’s greatest metropolis. To the west is a glass-and-steel forest of luxury towers bordering Central Park and Columbus Circle, where international magnates park their capital in extravagant luxury condominiums. To the east are celebrity architect–designed high rises that have recently sprung up along the East River, turning former industrial wastelands into some of the world’s priciest real estate. Off in the distance are the vast low-rise landscapes of the outer boroughs and suburbs, extending to the horizon.

Trump’s New York displays all of the contradictions of 21st-century metropolitan America. It is starkly divided by income and wealth, an embodiment of the inequalities that define and distort American politics today. Decades after the civil rights revolution of the 1950s and 1960s, metro New York ranks near the top of the most racially divided metropolitan areas in the United States. New York’s public schools, the most segregated in the nation, defy Brown v. Board of Education. The gaps in funding and student achievement are enormous.

New York’s housing is also increasingly unaffordable. Much of Manhattan and Brooklyn is out of reach to all but the wealthiest. Well-paid financial executives, marketers, and web developers have colonized formerly working-class neighborhoods such as Williamsburg and Bushwick. Further afield, Crown Heights and Prospect Heights, once enclaves of Caribbean immigrants, are rapidly gentrifying and whitening. If current patterns hold, much of Harlem below 125th Street (or SoHa, as some real estate brokers are attempting to rebrand it) will soon be majority white.

Donald Trump may have vaulted to the White House with the backing of small-town and rural voters, but he is one of the few big city–born and raised occupants of the White House in the last century. He has spent nearly all of his seven decades living in New York City. His fate and that of the metropolis are fundamentally linked. Trump rose to power through plunder and predation, aided and abetted by public policies that allowed him to build a fortune in real estate development. He is a beneficiary—personally and politically—of the staggering class and race inequalities that define modern American life.

A native of Queens, Donald Trump was the son and heir to Fred Trump, a scrappy and ruthless developer of housing for New York’s white working and middle class. An outer-borough nativist and one-time Klan supporter, the senior Trump profited mightily from the federal government’s massive intervention in the real estate industry, which began in the Great Depression. His fortune was premised on strict racial segregation, a process whose legacies still shape the geography of urban and suburban America.

Fred Trump’s most famous tenant, Woody Guthrie, lambasted his landlord:

I suppose
Old Man Trump knows
Just how much
Racial Hate
he stirred up
In the bloodpot of human hearts
When he drawed
That color line
Here at his
Eighteen hundred family project.

Donald Trump followed his father’s discriminatory path. In 1973, shortly after he took the helm of his father’s firm, the US Department of Justice filed a lawsuit accusing the Trump Organization of persistent discrimination by race in its housing developments. One of Trump’s doormen told investigators that “if a black person came to 2650 Ocean Parkway and inquired about an apartment for rent … I should tell him that the rent was twice as much as it really was, in order that he could not afford the apartment.”

The future president fought the charges and filed a $100 million countersuit accusing the federal government of defamation, a pattern that would play out again and again over his long career. The Trump Organization refused to admit culpability but eventually settled the civil rights case, agreeing to make apartments available on a nondiscriminatory basis. But that was a sham. In 1978, the Department of Justice charged that Trump continued to discriminate against African Americans.

The Trump family built its fortune on discriminatory practices that devastated urban America. Sociologists Douglas Massey and Nancy Denton coined the term “American apartheid” to describe the deep racial rifts that divided New York and most major metropolitan areas in the United States (especially in the Northeast and Midwest) into racialized territories. The housing segregation that made the Trump family’s fortune deprived generations of African Americans of decent housing, access to growing job markets, and well-funded schools. Fred Trump may have been a Klan supporter, but by the time Donald was running the firm, discrimination happened behind closed doors—in banks, real estate firms, and rental offices. The invisibility of this new version of Jim Crow made racial separation seem inevitable, the result of the natural workings of the market, or, as ordinary Americans put it, “Birds of a feather flock together.”

Endemic housing segregation fueled an urban crisis characterized by a deeply polarized politics of race, and it contributed mightily to massive urban disinvestment and depopulation as whites fled to homogenous suburbs. The Trumps, however, always found ways to profit from crisis. In the late 1970s, big cities, desperate to attract new investment, began to provide incentives to large-scale real estate developers. The Trump Organization was at the front of the queue for taking advantage of tax abatements, zoning variances, and other giveaways, all designed to “bring the city back” by building tourist destinations and upscale housing in downtowns.

Trump is a beneficiary—personally and politically—of the staggering class and race inequalities that define modern American life.

In 1979, as New York was slowly climbing out of its fiscal collapse—and as the city’s air was still darkened by the soot from burning buildings in the South Bronx—the gaudy Trump Tower began to rise on Fifth Avenue, distinguished by its vast atrium, which was ostentatiously adorned with brass handrails (polished twice a month) and rare Breccia Pernice marble cladding imported from Italy. The building benefited from a New York City tax abatement program (which the Trump Organization sued the Koch administration to get). Over the next three decades, the Trumps took in at least $885 million in tax breaks to develop luxury apartments, hotels, and other properties throughout Manhattan. New York’s Grand Hyatt, one of Donald Trump’s earliest successes, alone cost New York City more than $360 million in abated taxes.

Beginning in the Reagan era, Trump also took advantage of the deregulation of credit markets to fund his ventures. He expanded his empire outside of New York, availing his firm of state programs to reinvigorate declining cities, most famously New Jersey’s desperate effort to reinvent decrepit Atlantic City as the Las Vegas of the East. In the early 1990s, he built a (fragile) fortune in casino gambling, pocketing the nickels and quarters of desperate working-class and lower-middle-class bettors, who, left behind in a stagnant economy, clung to the dream of hitting the jackpot on rigged slot machines.

New Jersey bet big and lost bigger on gambling as a tool for urban revitalization, but even as Trump’s casino foundered and nearly brought his empire down, he leveraged his name into a next generation of profits that included a diverse portfolio of overseas branding schemes, entertainment ventures, and vanity golf courses. Trump has also continued to profit from his urban real estate investments, most recently the new, heavily subsidized Trump International Hotel in Washington, DC, just a few blocks from the White House.

Predatory real estate is the power center of Trumpism. The president’s former campaign chair, Paul Manafort, made a small fortune in housing development before heading overseas to lobby for dictators. In the late 1980s, Manafort supped at the trough of Ronald Reagan’s troubled Department of Housing and Urban Development, receiving nearly $43 million in federal subsidies to construct shabby affordable housing in suburban New Jersey.

Trump is also surrounded by aides who made their fortunes, in whole or in part, through fraudulent and predatory lending practices. Investigators reported that Secretary of the Treasury Steven Mnuchin’s OneWest bank foreclosed on tens of thousands of homeowners and engaged in deceptive practices, from shredding borrowers’ applications for loan modification to backdating mortgages. Commerce Secretary Wilbur Ross bought American Home Mortgage Servicing, one of the country’s largest predatory lenders. The new administration has prioritized easing banking and lending regulations, including eviscerating the Consumer Financial Protection Board, which protects borrowers from deceptive lending practices.

The aftermath of the 2008 housing crisis provided yet more opportunities for profit and plunder at the expense of low-income Americans, especially racial minorities, desperate for good housing. The president’s aide-de-camp and son-in-law Jared Kushner led the ranks of real estate investors who swept into communities ravaged by foreclosures, gobbling up apartments and modest homes at bargain prices. After minimal repairs and cosmetic renovations, they reap substantial profits by charging high rents, issuing exorbitant penalties for late payments or technical violations of lease terms, and slapping tenants with lawsuits and steep legal fees if they cannot pay up. Between 2011 and 2014, Kushner’s firm acquired nearly 20,000 units in multifamily buildings, mostly “distress-ridden, Class B” apartment complexes in declining suburbs in Ohio, New Jersey, and Maryland, with some five thousand in metro Baltimore alone.

Trump presides over a deeply unequal metropolitan landscape that has provided him, his advisers, and other bankers and real estate developers untold wealth in the last 40 years. Those practices have also played a key role in widening the gaps between rich and poor across American metropolitan areas. Since the 1970s, as sociologists Sean Reardon and Kendra Bischoff have shown, American metros have grown sharply more segregated by class. America’s “haves”—wealthy, mostly white, highly educated professionals—have clustered in elite suburbs but also in upscale urban neighborhoods. By contrast, working-class people are trapped in central cities and secondhand suburbs, places with out-of-fashion housing, shrinking commercial districts, collapsing tax bases, underfunded schools, and decaying infrastructure.

Inequality manifests itself starkly in housing markets. The Great Recession swept up millions of Americans, overwhelmingly lower-middle-class and working-class, in a wave of foreclosures. People of color—especially African Americans and Latinos, including many who were migrating to suburbs—were disproportionately victimized by predatory lending, which wiped out their precarious household wealth. In 2015, just as Trump launched his campaign for the presidency, African American and Latino households had only about 1/20 the household wealth of whites, largely because of the subprime crisis and the collapse of the real estate market.

Just as devastating has been the collapse of the affordable rental market. Between 2010 and 2016, the stock of affordable housing units in the United States dropped by 60 percent. The Washington Post reported that “affordable housing without a government subsidy is becoming extinct.” Left to fend for themselves, a growing number of low-income Americans are victims of profiteering landlords.

Predatory real estate is the power center of Trumpism.

Princeton’s Matthew Desmond has written powerfully about the crisis in affordable housing in major metropolitan areas. Working-class and poor people, unable to afford mortgages and lacking options in increasingly expensive cities, are trapped in units that are usually overpriced, poorly located, and badly maintained. One of the most common sights on sidewalks in poor neighborhoods are piles of shabby furniture, toys, and clothes, the telltale signs that poor families have been evicted for missing a rent payment.

Trump’s urban vision accounts for none of these realities. On the campaign trail, he offered a Bonfire of the Vanities view of American cities. On one hand, he trumpeted his development acumen, his ability to spin dollars out of New York’s high-rise air. On the other hand, he painted a cartoonish picture of the urban apocalypse. “Our inner cities are a disaster,” Trump declared during his final debate against Hillary Clinton. “You get shot walking to the store. They have no education. They have no jobs.” Trump dusted off venerable “blame the victim” rhetoric, pointing his finger at gang members, new immigrants, and poor people themselves.

Again and again, the real estate tycoon invoked the “inner cities,” 1960s shorthand for impoverished nonwhite neighborhoods skirting decaying downtowns. And he turned blame away from failed reinvestment strategies, tax breaks, and predatory lending practices, instead lambasting his political enemies. “The Democrats have failed completely in the inner cities,” he told an audience in Akron, Ohio. “For those hurting the most, who have been failed and failed by their politicians, year after year, failure after failure, worse numbers after worse numbers, poverty, rejection, horrible education, no houses, no homes, no ownership, crime at levels that nobody has seen. You could go to war zones in countries that we’re fighting and it’s safer than living in some of our inner cities that are run by the Democrats.”

Trump’s use of the term “inner city” and his reflexive association of “urban” and “minority” do not capture the changed reality of metropolitan America. Today, more than half of African Americans live in suburbs, as do a majority of immigrants. Many of them are refugees from urban neighborhoods marred by rundown housing, decaying infrastructure, underfunded schools, and overpriced, often shabby rental units. In fact, poverty rates are growing the most rapidly in suburbs and rural areas, not in urban America.

As president, Trump has inherited an urban policy mess that his administration will almost certainly make worse. American urban policy has been hobbled since the 1970s, when federal and state urban spending plummeted, and white backlash and austerity measures combined with devastating effect. The Nixon and Carter administrations trimmed urban spending, channeling money to city agencies through underfunded programs such as the Community Development Block Grant program. In Reagan’s eight years in office, federal urban expenditures fell from 12 percent to a mere 3 percent of domestic spending. Reagan also gutted the Department of Housing and Urban Development, which struggled with huge budget cuts and incompetent leadership. In the meantime, many state governments, often dominated by suburban and rural legislators and struggling with federal cutbacks themselves, also dramatically axed their budgets. In a polity that had become majority suburban in the 1980s, cities had fewer and fewer friends in high places.

In the 1990s and 2000s, neither Democrats nor Republicans spent much political capital on cities. Federal funds went to trendy but largely ineffective “enterprise” and “empowerment” zones, which offered tax abatements for commercial development in ravaged neighborhoods. Federal dollars went to the destruction of public housing. Its replacement with mixed-market and subsidized developments was in theory a good idea; in practice, however, these were built on too small a scale to have any real effect other than lengthening waiting lists for what little publicly funded affordable housing remained.

The Obama administration created a new office of urban affairs, but instead of reinvesting in quality public housing and other vital urban infrastructure, it put its efforts into small-scale public-private partnerships, revamping “empowerment zones” into “Promise Neighborhoods.” Other proposed Obama-era initiatives that would have benefited cities, including substantial funding for mass transit and decaying infrastructure, could not muster support in the GOP-controlled Congress.

Meanwhile, the wreckage caused by the Great Recession has spread poverty and insecurity not just throughout urban America but deep into previously aspirational suburbs too. What is needed, in response, is not just a reinvigorated federal urban policy but, more generally, a metropolitan revitalization program capable of tackling the economic woes that also impact many suburban residents.

In the 1990s and 2000s, neither Democrats nor Republicans spent much political capital on cities.

That is unlikely to happen in the Trump administration. Trump is committed to eviscerating the Department of Housing and Urban Development. His HUD Secretary, Ben Carson, a neurosurgeon with no housing or economic development experience whatsoever, has denounced federal housing assistance as “socialist,” critiqued HUD’s longstanding mandate to “affirmatively further fair housing” as meddling, and called on poor people to solve urban problems themselves.

Trump named Lynne Patton, his son Eric’s wedding planner, to lead HUD’s New York and New Jersey regional office, its largest. In one of her first official acts, she dropped a decade-long battle to desegregate housing in affluent Westchester County, New York. The GOP-led Congress recently approved a 2018 budget that axes nearly a half-billion dollars from HUD. Particularly hard hit will be HUD’s program to provide rental assistance to low-income Americans, more than half of whom are elderly or disabled.

Trump’s urban and housing policies (or their lack) will only worsen metropolitan inequality. They will make the lives of the poor even more insecure, while also enriching the financiers, developers, and landlords whose reckless decisions brought the country to financial ruin.

Some three decades ago, just as Donald Trump was remaking parts of New York in his image, urban geographer David Harvey described the city as “the high point of human achievement, objectifying the most sophisticated knowledge in a physical landscape of extraordinary complexity, power, and splendor at the same time as it brings together social forces capable of the most amazing sociotechnical and political innovation. But it is also the site of squalid human failure, the lightning rod of the profoundest human discontents, and the arena of social and political conflict.” Trump’s policies risk worsening that human failure and exacerbating that social and political conflict.

But some places are fighting back. Many municipalities, among them Baltimore, Boston, Chicago, Dallas, Denver, New Orleans, and Philadelphia, have been revitalized by an influx of Latin American immigrants and have declared themselves “sanctuary cities,” resisting the Trump administration’s efforts to use their scarce municipal resources to crack down on the undocumented.

New York’s housing department has stepped up its efforts to require developers to set aside affordable housing for low- and middle-income residents. The new mayor of Jackson, Mississippi, Chokwe Antar Lumumba, is channeling resources to neighborhoods that have been ignored in service of flashy downtown redevelopment schemes. And Los Angeles has begun addressing its massive homelessness problem by setting aside nearly a billion dollars to provide long-term housing alternatives to shelters and living on the streets. Suburban school districts such as Norristown, Pennsylvania, and Morristown, New Jersey, are creatively adapting their curricula and counseling to deal with an influx of new poor and working-class residents.

Municipal governments cannot solve the problems of inequality, discrimination, and inadequate education and housing on their own. But in the Trump era, perhaps they can at least lay the groundwork for a more just and equitable urban policy in a post-Trump future.

Featured image: The Panorama of the City of New York, Queens Museum of Art. Photograph by Chris Devers / Flickr